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Silicon Laboratories Inc. (NASDAQ:SLAB), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Silicon Laboratories’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Silicon Laboratories
What's The Opportunity In Silicon Laboratories?
According to our valuation model, Silicon Laboratories seems to be fairly priced at around 16% below our intrinsic value, which means if you buy Silicon Laboratories today, you’d be paying a fair price for it. And if you believe that the stock is really worth $169.42, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Silicon Laboratories’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Silicon Laboratories?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 93% over the next couple of years, the future seems bright for Silicon Laboratories. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? SLAB’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on SLAB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.